Investors in Turning Point Brands (NYSE:TPB) have unfortunately lost 24% over the last five years
Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Turning Point Brands, Inc. (NYSE:TPB) shareholders for doubting their decision to hold, with the stock down 27% over a half decade.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Turning Point Brands
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Looking back five years, both Turning Point Brands' share price and EPS declined; the latter at a rate of 16% per year. The share price decline of 6% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around. With a P/E ratio of 51.31, it's fair to say the market sees a brighter future for the business.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Turning Point Brands' earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Turning Point Brands' TSR for the last 5 years was -24%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 16% in the last year, Turning Point Brands shareholders lost 10% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Turning Point Brands is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...
Turning Point Brands is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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